Saturday, September 26, 2020

Sechaba Brewery profits shine ahead of a gloomy future

Sechaba Breweries, the parent company of the KBL, shrugged off continued inflationary pressure on input costs driven by upward trends in fuel and food grain prices and currency depreciation as it registered significant growth in all segments.

In its full year results to the end of March, the company said clear beer and traditional beer volumes shot-up 7.8 percent and five percent, respectively, while soft drinks were also up by five percent.

The move led to a significant jump in turnover with firm 19 percent to P 1.28 billion, triggering an operating profit growth of 15.5 percent periodÔÇôonÔÇöperiod.
The developments were attributed to low inflationary rates in the first half of the year, which led to a marketing strategy that was employed by the company over the period.

“Improving GDP for the year and low inflation during first half of the year enhanced disposable income leading to pleasing volume growth in both underlying associate companies, namely Kgalagadi Breweries (Pty) Ltd, and Botswana Breweries (Pty) Ltd (BBL) during the financial year,” the company said in a statement.

It added: “Various marketing, sales and distribution initiatives, including portfolio expansion, product quality, and affordability driven by returnable and improved sales execution capacity are bearing fruit in the market place.”
The company’s cashÔÇôcow, KBL, which is also partly owned by SABMillerÔÇöthe world’s second largest brewer ÔÇö embarked on a raft of measures, including the new packaging for St. Louis with a new label and the launch of new products after it lost the rights of marketing of the Dutch beer, Amstel, in the southern African region.

As such, it responded by launching the Italian ‘Peroni’ and the Czech ‘Hansa Marzen Gold among its premier brands. Further, it introduced ‘Ready to Drink’ beverage ‘Barons’ and a new bottled water ‘Bonaqua’ in the local market during the year. BBL, which is responsible for traditional brews and Mageu, on the other hand, is also testing some new products developments, said the report.

In line with global trends, the company said it experienced severe pressure on the price swing of input costs, especially on the cost of grain, packaging material, fuel, and the cost of utilities. The cost pressure was further worsened by the continued depreciation, during the financial year, of the Pula against Euro at 19 percent and US dollar at 11.7 percent which, along with the ZAR are the major trading currencies of KBL and BBL.

The company imports a lot of malt, sugar and maize, which are crucial ingredients of making beer, from the international markets.

However, finance cost of the associates has decreased by about 28 percent during the year on account of lower cost of fundsÔÇöincluding its ability to hedge forwardÔÇö and improved working capital management. That has left the country’s titanic brewer with profit after tax up by 15 percent likeÔÇôon-like while earnings per share ÔÇô a crucial measurement of the company’s performanceÔÇö jumped from 94.4 thebe per share to 108.4 thebe per share for the year.

Sechaba, which is a trail-blazer on the domestic bourse to align itself with the international standard of reporting and dividend payment declared on quarterly basis, said it had decided to award a net fourth and final dividend for the year amounting to 23 thebe per share, giving a total dividend for the year 102 thebe per share ÔÇö an increase of 20 percent like-on-like.

Management has pledged to continue on focusing on its key market place strategies and drive volume and revenue growth during the forthcoming year, as well as continuing to drive productivity gains and cost savings to increase shareholders’ value.

It has also committed itself to stepping up its corporate social investment initiatives under Kickstart to align itself with other SABMiller subsidiaries within the African region.

But going forward, the company is wary about government’s new liquor measures which are likely to contribute to massive retrenchments, bankruptcies of property owners and a serious blight on its shareholders’ value.

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